Performance regulation in a networked healthcare system: From cosmetic to institutionalized compliance
| Published date | 01 March 2020 |
| Author | Judith Erp,Iris Wallenburg,Roland Bal |
| Date | 01 March 2020 |
| DOI | http://doi.org/10.1111/padm.12518 |
SYMPOSIUM ARTICLE
Performance regulation in a networked healthcare
system: From cosmetic to institutionalized
compliance
Judith van Erp
1
|Iris Wallenburg
2
|Roland Bal
2
1
Utrecht School of Governance, Utrecht
University, Utrecht, The Netherlands
2
School of Health Policy & Management
Health Care Governance, Erasmus University
Rotterdam, Rotterdam, The Netherlands
Correspondence
Judith van Erp, Utrecht School of Governance,
Utrecht University, Bijlhouwerstraat 6, Utrecht
3508 TC, The Netherlands.
Email: j.g.vanerp@uu.nl
Funding information
Dutch Care Authority NZa
This article studies the role of a public regulator in managing the
performance of healthcare professionals. It combines a networked
governance perspective with responsive regulation theory to show
the mechanisms that have added to significant changes in medical
cost management in the Netherlands. In a five-year period, hospital
practices transitioned from cosmetic compliance with performance
regulation and strategic upcoding to institutionalized compliance
more in line with regulatory goals. The article demonstrates how
policy changes transformed incentive structures, introduced new
forms of accountability, and added actors to the network with
technocratic disciplining tasks. The networked character of perfor-
mance regulation offered opportunities for a responsive, non-coer-
cive regulatory strategy that engaged various actors in a regulatory
conversation about strategic coding. Responsive regulation can
reduce strategic responses to performance regulation and manage
the gap between administrative and clinical logics. The case study
contributes to our understanding of the effectiveness of respon-
sive, non-punitive regulation in networked settings.
1|INTRODUCTION
The introduction of market elements in many Western healthcare systems, as an attempt to enhance performance
while reducing costs, has sparked the development of multi-layered governance networks. In these networks, state
actors exercise regulatory authority and share regulatory roles with hybrid and non-state actors such as hospitals,
insurance companies, professional medical associations, licensing boards and accrediting bodies (van de Bovenkamp
et al. 2014). Performance regulation has been introduced to reduce healthcare costs through enhancing accountabil-
ity on services provided. In this article, we zoom in on a specific and keyaccountability instrument of contemporary
DOI: 10.1111/padm.12518
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any
medium, provided the original work is properly cited.
© 2018 The Authors. Public Administration published by John Wiley & Sons Ltd.
46 wileyonlinelibrary.com/journal/padm Public Administration. 2020;98:46–61.
hospital markets: the diagnosis-related groups (DRGs). DRGs, financial schemes for healthcare purchasing, serve as
accountability arrangements for coding, billing, and managing hospital service delivery, enabling healthcare network
participants to manage the performance of medical staff (Busse et al. 2013; Kerpershoek et al. 2016).
A common problem with healthcare performance regulation is that in the eyes of medical staff, formal perfor-
mance regulation systems have little connection with the delivery of clinical services (Hyman 2001; Kurunmäki
et al. 2003). Although performance-based regulatory regimes are expected to substitute professional accountability
for bureaucratic accountability structures (May 2007), professional accountability often remains dominant and works
merely in symbolic compliance to performance regulation (Hyman 2001; Kurunmäki et al. 2003). Medical decision-
making requires discretion in professional judgement, but this also creates a grey area where performance regulation
can be strategically exploited. Reactions can range from doctors disengaging from performance regulations, ignoring
them ‘until they go away’(Huising and Silbey 2011), to passive resistance and further to active exploitation of regula-
tory loopholes and gaming the system (Bevan and Hood 2006; Heimer 2011). This raises the question how doctors’
commitment to performance regulation can be improved in networked governance structures, where regulatory
authority is shared with a variety of hybrid and non-state governance actors, and medical staff enjoy a large degree
of professional autonomy.
This article analyses the institutional changes in the practice of DRG coding in the Netherlands over a period of
five years, in which DRG coding practices transitioned from strategic compliance and widespread noncompliance, to
coding practices more in line with public interests and regulatory goals. Also, DRG coding developed from an individ-
ual practice by medical specialists to institutionalized hospital management practices—expanding the number of
actors (‘experts’) involved, bringing in new interests and accountability arrangements. The central question guiding
this article is: How did the institutional transition towards a more compliant DRG system take place within the net-
worked governance structure of the Dutch healthcare system, and what role did the public regulator play in this tran-
sition? Based on extensive qualitative interviews conducted in 2012 and 2016 with various network participants as
well as a survey of medical specialists, our study analyses the mechanisms that underlie the development in medical
specialists’attitudes to correct coding and billing—from highly sceptical to more accepting—as well as the rapid insti-
tutionalization of compliance practices in hospital organizations. Building on theories of networked accountability
and responsive regulation, we examine how new institutions for accountability institutionalized compliance in hospi-
tals, and how the Dutch healthcare regulator (Nederlandse Zorgautoriteit,NZa) interacted with other network actors
to overcome the deeply embedded resistance to performance regulation.
A‘positive case’like the institutionalization of DRG compliance may make an important theoretical contribution
to our understanding of effective regulation of professional performance within governance networks. This article’s
theoretical contribution rests on the combination of networked accountability and responsive regulation theory.
First, building upon scholarship on accountability in governance networks (Koliba et al. 2011; Klijn and Koppenjan
2014; de Lancer and Steccolini 2015; Mills et al. 2016), the article analyses how the introduction of new actors, and
their expertise, interests, instruments and working routines, created hybrid, multiple forms of accountability, in addi-
tion to the dominant medical-professional accountability of doctors. Second, we apply responsive regulation theory
(Ayres and Braithwaite 1992; Baldwin and Black 2008; Braithwaite 2011; McDermott et al. 2015) to elucidate how
the NZa in its specific role as public regulator in the network used a non-coercive and persuasive regulatory strategy
to engage with the emerging accountability structures in the network.
Crucially, we argue that the regulators’responsiveness to the networked character of governance as well as to
the position of hospitals and medical specialists in this network stimulated the institutionalization of correct coding
in hospital organizations. These insights contribute to scholarship on network accountability, which has often focused
on the decreasing importance of regulators in governance networks and the regulatory failures resulting from
accountability conflicts in networks (Osborne 2010). Thus, this study concurs with recent case studies of other suc-
cessful regulatory action in networks (McDermott et al. 2015; Mills et al. 2016; Reynaers and Parrado 2017) to con-
tribute to our understanding of how regulators can act as change agents in networks, especially in settings with
heterogeneous, conflicting perspectives and motives of network participants.
VAN ERP ET AL.47
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